Annex 11

Annex 11A - Customary International Law

The Parties confirm their shared understanding that “customary international law” generally and as specifically referenced in Article 7 (Treatment of Investment) of Chapter 11 (Investment), including in relation to the customary international law minimum standard of treatment of aliens, results from a general and consistent practice of States that they follow from a sense of legal obligation.

Annex 11B - Expropriation and Compensation

The Parties confirm their shared understanding that:

1. An action or a series of related actions by a Party cannot constitute an expropriation unless it interferes with a tangible or intangible property right or property interest¹ in a covered investment.
2. Article 10 (Expropriation and Compensation) of Chapter 11 (Investment) addresses two situations:
   
   1. the first situation is direct expropriation, where a covered investment is nationalised or otherwise directly expropriated through formal transfer of title or outright seizure; and
   2. the second situation is where an action or series of related actions by a Party has an effect equivalent to direct expropriation without formal transfer of title or outright seizure.
3. The determination of whether an action or series of related actions by a Party, in a specific fact situation, constitutes an expropriation of the type referred to in Paragraph 2(b) requires a case-by-case, fact-based inquiry that considers among other factors:
   
   1. the economic impact of the government action, although the fact that an action or series of related actions by a Party has an adverse effect on the economic value of an investment, standing alone, does not establish that such an expropriation has occurred;
   2. whether the government action breaches the government’s prior binding written commitment to the investor, whether by contract, licence or other legal document; and
   3. the character of the government action, including, its objective and whether the action is disproportionate to the public purpose.²
4. Non-discriminatory regulatory actions by a Party that are designed and applied to achieve legitimate public welfare objectives, such as the protection of public health, safety and the environment do not constitute expropriation of the type referred to in Paragraph 2(b).

¹  For the purposes of this Annex, “property interest” refers to such property interest as may be recognised under the laws and regulations of that Party.

²  “Public purpose” shall be read with reference to Article 10.1(a) and 10.6 (Expropriation and Compensation) of Chapter 11 (Investment).